African firms tackle supply chain risk

2 June 2010

2 June 2010 | Nick Martindale

Major African businesses are lowering their costs and reducing their exposure to fluctuating raw material prices through tighter control of their supply chains, according to research by Boston Consulting Group.

This strategy forms part of an approach towards managing volatility, along with expanding their geographic reach and taking advantage of government support, which distinguishes those organisations that have become genuine competitors to more established multinational companies.

The African Challengers: Global Competitors Emerge from the Overlooked Continent report said: “The African challengers have consistently displayed resourcefulness in building businesses under challenging conditions. SABMiller, for example, developed a new beer in Uganda called Eagle Lager, using locally grown sorghum rather than more expensive imported malt.”

Further characteristics of successful organisations included raising productivity, expanding out of Africa, investing in people development and creating a global brand.

The study identified 40 fast-growing African companies, ranging in size from $350 million to $80 billion turnover, which are emerging to threaten the dominance of global multinationals.

Almost half - 18 - of these come from South Africa, while Egypt has seven companies and Morocco six. The remaining nine businesses are from Algeria, Angola, Nigeria, Togo and Tunisia.

Other advantages for these firms included access to natural resources – eight challengers fall into this category – as well as lower labour costs compared to other developing markets and fewer business overheads such as fixed-line telecommunications.

But it cautioned many African businesses do not have the right mindset to achieve global stature, the report concluded, with a lack of a long-term vision and creative solutions to problems the main barriers.

Other organisations on the list included BMCE Bank in Morocco, Banco Africano de Investimentos and Sonangol in Angola, Egyptair and Orascom Telecom in Egypt and Barloworld and Murray & Roberts in South Africa.

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